Stanislau Bahdankevich: National bank autonomy doesn’t presuppose its neglect
The former chief of the National Bank of Belarus Stanislau Bahdankevich commented upon the answer given by Aliaksandr Lukashenka on the question about the autonomy of the financial regulator.
“I suggested paying attention to the fact that lots of high-ranking officials led by the President are involved in economy. In these conditions National Bank should be occupied with its own tasks. Notably, providing the economy with the stable currency. And in order to do that the Bank should be free from pressure. And the President has turned it all so as if I want the Bank to be neglected”, - told Stanislau Bahdankevich in the talk with the EuroBelarus Information Service, commenting upon the answer given by the President to the question asked through TUT.by portal.
“I’ve never meant that the Bank should be exempted from the society and state control. But the autonomy means that it only gives an account of its actions while all the planning and decision-making are carried out by the Bank independently”, - highlighted the interlocutor.
The former head of the National Bank paid special attention to the fact that it were the decisions made under pressure of the President and government that provoked the crisis of 2011: “National Bank produced the money for the accommodation financing and rural economy crediting out of thin air. The Bank appropriated two commercial banks – “Belarusbank” and “Belagroprombank” - with 20 trillion rubles for the loro account. I don’t think that it was done by Piotr Prakapovich himself. It was done under pressure, as the sources to finance accommodation crediting and other government projects were not enough”.
How exactly were spent the money produced out of thin air? Thus, the credits for the rural economy were made at 5 percent interest with the inflation of 100 percent; accommodation financing for the needy were made at either 0 percent or 3 percent interest. “Is it normal? – wonders the economist. – One can reduce the interest rate, but the 100 percent compensation for the difference to the bank should be budgeted”.
The main task of the National Bank is the anti-inflation move
According to Stanislau Bahdankevich, for the chairman of board not to be afraid of discharge he should have the autonomy “to research into its own problem, i.e. not to allow the galloping inflation that took place in 2011-2012 to appear”.
However, the interlocutor admitted that after the crisis of 2011 the President has become far less steeped in the work of the National Bank led by Nadzeia Ermakova. But unfortunately, it didn’t help much with the anti-inflation move. “In 2012 the GDP growth made up 1.5 percent, while the National Bank allowed the growth of the monetary expansion in 50 percent. I.e. the production increased by 1.5 percent, while the paper currency increased by one and a half times as much. Of course it is inflation! That is why the National Bank should have started to terminate the ruble monetary supply, not to produce it out of nothing”, - Stanislau Bahdankevich believes.
He reasoned the importance of transition from the exchange rate targeting to the inflation targeting in the following way: “What do people care about? Are they paid in US dollars or do they pay in dollars when they go shopping? Price stability in the domestic market is extremely important for the society. And the price stability is determined by the volume of the money supply. If the National Bank controls it, then the prices won’t increase. And the exchange rate won’t grow per se, too. With the low inflation the exchange rate will be more or less stable as well”.
About Ben Bernanke and the builder and reclamation expert
Stanislau Bahdankevich also finds it important that to the board of administration of the National Bank are appointed “people who are famous and competent both in the financial and in the economic community; people, who have publications, academic degrees and so on”. Such demands can be found, for example, in the European National Bank appointment clause. “And in our case these are builders-ameliorators who are appointed”, - said the expert, implying the appointment of Piotr Prakapovich, who has worked in the capacity of the chief engineer for 20 years.
During the press-conference Aliaksandr Lukashenka referred to the Western experience of the introduction of control for financial institutions. “Look at the European Union and at the USA: as soon as the crisis burst out there and some financial organizations and banks collapsed, the issue of control immediately appeared and was introduced. Russia, for instance, has taken the same way and create some kind of monster that will control all the bank system independently of the President”, - noted the head of the state.
“Such comparison is absolutely inconsistent, - observed Stanislau Bahdankevich. – We see that the influence of the head of the US Federal Reserve System Ben Bernanke, for instance, is comparable with that of the US President. Because he makes decisions by himself; he is a politically independent figure”.
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